Psychologists have come a long way in decoding human behaviour over the past few decades, and their findings can be applied effectively in a number of settings. Here are three powerful concepts that entrepreneurs can use in their businesses.
Use the Power of Defaults
Psychologists have understood that human beings are always grappling with choices and thus get decision fatigue very quickly. This is also one of the reasons why people don't do things that are clearly beneficial to them, like exercising and investing for retirement.
With this understanding in mind, smart entrepreneurs can use the power of defaults in various ways so that their customers find it easier to make decisions take action.
Use the Power of Loss Aversion
Psychologists have found that we tend to strongly prefer avoiding losses than to acquiring gains. This is the basic tenet that marketers use to create a sense of scarcity among their customers to nudge them to take actions.
Savvy entrepreneurs can use this tendency to create a sense of loss among customers (there are some pointers here). Another place where you can use this is with employees. I know of an entrepreneur who at the start of the year gave his sales teams a voucher for an international vacation with their family that could be redeemed at the end of the year, if they achieved their sales quotas.
If anyone from the sales team didn't achieve their sales quotas, they were to return the vouchers.
Simply by giving the vouchers upfront, the entrepreneur was able to significantly impact the number of executives achieving their sales quotas.
Use the Power of Commitment Devices
A commitment device is a means by which you lock yourself into a course of action that you might not otherwise choose but one that produces a desirable effect or result.
Smart entrepreneurs can use commitment devices to ensure that their customers come back to them for more business and become loyal customers.
Smart entrepreneurs get their important customers to publicly share how satisfied and happy they are with the entrepreneur's product/service and how it helps them. Here's why it works: Once, someone makes a public statement about how beneficial an entrepreneur's product or service is, they are least likely to switch to a competitor unless the entrepreneur really messes things up.
These are just three concepts that entrepreneurs can use. There is a wealth of concepts in behaviour psychology that entrepreneurs can use to benefit from.
A good place to start is by reading the following books:
• Nudge - Richard Thaler
• Thinking, Fast and Slow - Daniel Kahnemann
• Influence - Robert Cialdini